Oil steadies near $71 after two-day rally

© Reuters. FILE PHOTO: A pump jack stands idle in Dewitt County, Texas January 13, 2016. REUTERS/Anna Driver

By Ron Bousso

LONDON (Reuters -Oil prices steadied near $71 a barrel, taking a breather after a strong rally in recent days as Mexico was set to resume crude production following a major outage.

Brent crude was up 14 cents, or 0.2%, to $71.19 a barrel by 1028 GMT, reversing earlier losses. U.S. West Texas Intermediate (WTI) crude was up 8 cents, or 0.12%, to $67.62.

Both benchmark contracts over the previous two days rose by about 8%. That rally erased most of the slump from a seven-day losing streak on the back of a resurgence in COVID-19 cases.

The rally came after Mexican supply fell by more than 400,000 barrels per day following a fire on an oil platform. Mexico's state oil firm said it expected to resume production by Aug. 30.

"While volatility looks set to continue, we see further gains for oil as global economic normalisation continues and OPEC remains disciplined on crude supplies," said Mark Haefele, chief investment officer at UBS Global Wealth Management.

The bank expects Brent crude prices to rise to $75 a barrel by December.

American Petroleum Institute data showed crude inventories fell 1.6 million barrels for the week ended Aug. 20, while gasoline stockpiles fell 1 million barrels, according to sources, who spoke on condition of anonymity.

Analysts were expecting crude stockpiles to fall by 2.7 million barrels and gasoline stocks to drop by 1.6 million barrels, a Reuters poll showed.

U.S. Energy Information Administration official data is due to be released on Wednesday at 1430 GMT.

Last week's losses were driven by fears that the spread of the highly contagious Delta variant of the coronavirus in Asia would slow the region's economic recovery.

In a promising sign that the spread of Delta infections was easing in China, the country on Wednesday reported just 20 new confirmed coronavirus cases for Aug. 24, down from 35 a day earlier.

(Additinoal reporting by Roslan Khasawneh in Singapore and Sonali Paul in Melbourne; editing by Edmund Blair and Jason Neely)